Bessette/Pitney’s AMERICAN GOVERNMENT AND POLITICS: DELIBERATION, DEMOCRACY AND CITIZENSHIP reviews the idea of "deliberative democracy." Building on the book, this blog offers insights, analysis, and facts about recent events.

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Tuesday, July 12, 2011

California v. Texas

Buffeted by high taxes, strict regulations and uncertain state budgets, a growing number of California companies are seeking friendlier business environments outside of the Golden State.

And governors around the country, smelling blood in the water, have stepped up their courtship of California companies. Officials in states like Florida, Texas, Arizona and Utah are telling California firms how business-friendly they are in comparison.Companies are "disinvesting" in California at a rate five times greater than just two years ago, said Joseph Vranich, a business relocation expert based in Irvine. This includes leaving altogether, establishing divisions elsewhere or opting not to set up shop in California.

"There is a feeling that the state is not stable," Vranich said. "Sacramento can't get its act together...and that includes the governor, legislators and regulatory agencies that are running wild."

The state has been ranked by Chief Executive magazine as the worst place to do business for seven years.

"California, once a business friendly state, continues to conduct a war on its own economy," the magazine wrote.

That is about to change, at least if Lieutenant Governor Gavin Newsom has anything to say about it. Newsom is developing a plan to address the state's economic Achilles heels, and build on its strengths. It will be unveiled at the end of July.

"California has got to get its act together when it comes to economic development and job creation," he said.

While not all companies investing elsewhere are doing so for economic reasons, some are shopping around for lower costs, lighter regulations, stable leadership and government assistance and incentives.

The most popular places to go? Texas, Arizona, Colorado, Nevada, Utah, Virginia and North Carolina, said Vranich. All rank in the Top 13 places to do business, according to Chief Executive.

At The Sacramento Bee, the Drucker Institute's Rick Wartzman writes of Texas and California:

Aspects of the Texas economy are unusual, if not unique, and it will be difficult or impossible for other states to replicate them. For example, the energy industry is booming, as are agricultural commodities destined for export — a boon for a huge cotton and beef producer such as Texas.

What's more, thorny tradeoffs surely exist. Texas is attracting businesses, in part, because it has low taxes. But that, in turn, makes for a smaller safety net, which is one reason Texas has a high incidence of poverty and, compared with every other state, the biggest proportion of its population without health insurance. There are also serious questions about the quality of jobs in Texas. A "right to work" state, it is tied with Mississippi for having the biggest percentage of workers paid at or below the minimum wage.

But even with these significant caveats, Texas long has been the most robust jobs engine in the country, and its policies and practices deserve deeper reflection. Some say, for example, that an increase in education funding 25 years ago lifted the quality of the work force.

"That set the table for job expansion," Fort Worth Star-Telegram columnist Mitchell Schnurman has asserted. (But budget pressures in Texas are forcing education spending to go in the other direction.)

Also deserving of further exploration are the strict lending guidelines Texas banks instituted after the savings and loan crisis of the 1980s. Those standards spurred institutions to keep larger capital reserves and take on fewer problem mortgages than were seen elsewhere in the country. As a result, the state emerged relatively unscathed from the most recent real estate meltdown.

At the same time — and this, of course, is the tough part for those on the left to swallow — it is clear that the state's limits on taxes, regulations and lawsuits are contributing to the job machine.